The best payment options for small businesses

>UK’s GDP growth has been steady and has recovered since the financial crisis. According to the Financial Times, consumer spending has been one of the driving forces of this recovery. This means that small businesses in the UK have a brighter future. However, the biggest challenge facing most business owners is choosing the ideal payment option from the long list of options available. Although billing your customers is vital, choosing the best payment method for a small business is equally important. Customers need a solution that is safe, fast, and reliable. This post will dive deep into the topic and give you details on the reputable payment options available.

The Existing Payment Methods in the UK

There are various payment methods currently being used in the UK. They range from the traditional options to modern solutions for online shoppers. Aside from credit cards, small businesses also make use of cheques and debit cards.

  • The use of cheques is still prevalent among companies, small businesses, and also the self-employed in the UK. However, this option is mostly used by the older generation since it is quite slower when transferring or receiving money.
  • The use of debit cards as a payment method is highly utilized for grocery and retail shopping.
  • The British prefer to use direct debits and standing orders when making regular payments such as rent and utility bills.
  • Online payment such as Google Wallet, Apple Pay, and PayPal is gaining more popularity among big and small businesses.

1. Cheques

Paying by cheque is still popular in the UK as much as this payment option seems antiqued. The older customers or business owners usually prefer this payment method. However, its use as drastically declined since the late 90s after the introduction of new payment methods. Nonetheless, at least 346 million cheques totaling a value of £442 billion were written in 2018. This means that customers and business owners still embrace the payment method.

There are two main reasons why the use of cheque remains relevant in the UK; first is because cheques are free of charge; hence they are ideal for start-up businesses or the self-employed individuals who don’t want to run into transaction fees. Secondly, a few years ago, people were able to send cheques to banks via a picture. This means that you don’t have to deposit the cheque to the bank physically.

The major drawback of using this method is that cheques are not cleared instantly, which means business owners may have to wait a little longer before receiving their money. Since this payment method is highly prone to fraud, it is important to take precautions when using it.

2. Debit Cards

Card payment is not only accessible in the UK but the world at large. This traditional payment method is commonly used for regular retail and grocery shopping. Debit cards were introduced in the 1980s to reduce the use of cheques. Customers can use debit cards instead of cash, but unlike credit cards, the payments are deducted from the customer’s account instantly. The popular debit cards used in the UK include:

  • Debit Mastercard: This is a safe and convenient online, face-to-face, or telephone payment method. Businesses prefer this method as it allows speed and contactless payments when making transactions of 20 GBP or less.
  • Visa Electron: Since all funds need to be available during the transfer period, Visa Electron doesn’t allow overdraft. As a result, this card is highly recommended for young users or people with a poor credit history.
  • Visa Debit: This payment method offers the convenience of a credit card but only accesses funds in your current account. Users can get cash out from the ATMs in the UK and abroad.
  • Maestro: You can access your money through PIN-based direct access from your account with Maestro. You can make transactions either in the UK or abroad.

3. Direct Debit and Standing Orders

While direct debits and standing orders are highly used for regular payments to utility companies or tax, small businesses can also make use of these forms of payment. In the UK, businesses adopt these options for payment of subscriptions for things like gym membership or software. Most customers and business owners are generally confused as to the difference between the two payment solutions. The two are instructions to a financial institution to make regular payments to a third party.

Standing orders are typically set by instructing the bank to pay a certain amount of money to your service provider at regular intervals. Only the customer holds the right to change the details of the standing order, including the sum and the recipient. It generally takes about three days for the money to appear into the account of the business owner.

A direct debit, on the other hand, allows the customer to authorize a third party to make a withdrawal of a certain amount of money from the customer’s account. The money is then transferred to the account of the third party, which is done instantly. Therefore, direct debits are cheaper and faster than standing orders hence highly preferred over standing orders.

4. Alternative Payment Methods

E-commerce has steadily grown in the UK with numbers hitting £137.38bn in 2018 according to ONS data. Evidently, making purchases over the internet is becoming common than before. This trend has seen the development of new payment methods, and as much as many transactions are still carried out with debit or credit cards, the new and alternative methods will soon take over. They are ideal for the self-employed, the small businesses, and large companies too. The top three online payment methods include:

  • Wordpay: This is the UK’s most popular payment method considering that it has the most flexible plans for small businesses. It is flexible as it accepts over a hundred currencies and comes complete with a merchant account, which serves as a checking account for customers making card payments.
  • Paypal: This online payment method has made checking out of e-commerce website pain-free. It is as user-friendly for businesses as it is for its customers. It is not only easy to use, but super speedy.
  • Stripe: This is an ideal payment method as it lets you create your customized payment system. It is quite powerful as it supports handy features like subscription services, mobile payments, and one-click checkouts.

A Guide to Choosing a Payment Method

If you have a small business, you are self-employed or run a big company, you need to make an assessment of your business and understand your requirements in as far as payment options are concerned. You should also factor in long-term needs because the business will eventually evolve. Below are factors you need to consider before choosing a payment method in the UK.

1. Security

Payment security is critical for your business’ and customer’s sake. It’s therefore vital that you choose a payment provider with secure data processing. If you choose credit and debit cards as your preferred payment method, select a provider that is PCI DSS compliant. A good processor is one that safeguards the customer’s payments through the latest data security. This includes using point-to-point encryption.

2. Processing Fees

Small and start-up businesses will appreciate a payment option that offers the lowest processing fees. High processing fees will eventually eat into your profit. Therefore, you need to shop around for the most favourable processing fees. At the same time, nominal processing fees should not be your main point of focus. Payment providers also have hidden charges that can affect your profit margin. Nevertheless, some of the providers that require premium can guarantee certain benefits like fraud protection and data security.

3. Transaction Amounts and Frequency

Several payment providers have tiered pricing normally based on amounts and transaction frequencies. Consequently, business owners are supposed to choose a package that fits their current needs and the here and now. Basically, you will pay more than necessary if you miss or exceed the transaction limits. Eventually, you want your business to rely on a payment provider that will quickly adjust as your business needs will always change.

4. The Ease to Setup and Maintain

The last thing you want is spending more time and energy, setting up and maintaining a payment method. Your payment provider should be easy to work with. They should provide enrollment applications, training, and hardware and software upgrades. Maintenance should also be as convenient as possible. You should consider changing your provider if you regularly troubleshoot your payment environment. Every minute spent on a buggy interface is precious time deducted from your core business.

5. Customer Support

Any service provider needs to set up a reliable and responsive team to handle questions and inquiries that may arise. The same applies to payment providers. Although most payment environments entail “set it and forget it” situations, problems will always crop up, even with the best processors in the world. You should consider a provider that is available 24/7. Although email services are still effective, live phone calls and chats are the ideal channels.

All You Need to Know About Cash Management Systems

With the above payment options being highly embraced by both start-ups and established businesses, every business needs some sort of cash management system to handle purchases. You can choose either the traditional electronic cash register or the modern Point Of Sale system referred to as POS. Business owners need to understand the following about the two Cash Management systems.

What’s the Difference Between a Cash Register and a POS?

Cash Registers: Although this system uses old technology, it still has its place in the UK business industry. This cash management system is ideal for adding up sales per day. It also gives business owners a departmental breakdown of sales. The only setback that makes its counterpart better is that it doesn’t provide any profitability or stock management reports. Therefore, cash registers are the best option for businesses that require manual input.

POS: This system provides intelligent information based on barcodes, departments, products, customer, suppliers, profitability, reducing costs, and growing your business. The system also controls staff theft and other things a business owner finds sensible. Since POS uses the latest technology, it reduces staff levels thanks to its ability to run on portable devices like mobile POS. POS systems can also be linked to webstores and help a business manage stock levels and pricing.

How to Choose Your POS System

With hundreds of POS systems in the UK market today, choosing the best from the rest may not be as easy as it was before. Other than considering your business needs, you also need to consider the following factors:

1. Features

The POS should have features that make it easy to run a specific business. Other than just accepting payments and ringing up sales, your cash management system should be able to streamline other processes like customer management and inventory. Every system comes with its own features and service levels. As a result, business owners need to consider a POS system that captures different categories of the business.

2. Cloud-Based Systems

Cloud-based systems are known to have benefits such as lower upfront costs considering that you only pay a monthly fee as opposed to purchasing a software license. Business owners will also have browser access to back reporting tools and office management anywhere and anytime. POS systems are quite efficient as they work on either Android tablets and iPads. Therefore, before signing up with a tablet you plan to use with the system, it is important that you first check for compatibility.

3. No Contractor Leases

Since your business needs are bound to change with time, you should consider a no contractor leases. This is because the system might eventually fail to meet your business needs, or you might find a cheaper system during your operations. You should not be stuck using a system for years or spend more money to get out of a contract early. Steer clear of equipment leases considering that most of them are impossible to cancel. Ideally, you should look for a POS system that operates on a month-to-month basis. Additionally, you should buy your equipment if you have the capacity; a simple system can still serve you as you save for a high-end hardware.

4. Integrations

The POS system you choose should be easy to connect with other business systems you use in your business—like email marketing and accounting software. This is beneficial to your business, big or small, as it lets the programs share customer contact information and sales figures. As a result, you will save yourself the stress of manually downloading it from one program only to upload to another.

Legal Requirements of Cash Registers and POS

If you have just acquired a new cash register or POS device, you are probably wondering whether there are any legal requirements surrounding cash management systems. If you live in the UK and run a business, small or big, that generates all, or parts of its revenues from cash transactions, then the cash register records are considered the basis for your business’s taxes. As a result, you are expected to carefully document all transactions in your business and ensure they meet the requirements of Her Majesty’s Revenue and Customs (HMRC). Business owners who handle a large number of cash receipts and expenditures daily should always have an electronic checkout system. It is important to note that cash management systems and accounting systems are all subjected to the same recording and retention obligations in the UK.

Cases of cash manipulation and fraud are on the rise. Business owners are on the receiving end as some customers perform fraudulent returns. Employees, on the other hand, have also been reported to steal from the till. This is why business owners are advised to make use of a host of cash register software available today. This provides security elements that protect the business. But these cases have touched on both sides of the coin. There have also been cases of till tampering by business owners in an attempt to evade tax. This is why the EU has taken steps to combat this type of fraud on a federal level. It has introduced legal standards that must be followed if you wish to have an electronic cash register in your business.


With all that tackled, you now understand what the best payment methods for a small business are. The assuring bit of all the methods mentioned is that they are the safest you can find in the UK. It is thus up to you to consider your business needs and choose a method that suits your operation. The type of cash management system you choose should also be one that will accommodate the size of your business and make your customers comfortable doing business with you.

Leave a Reply

Your email address will not be published. Required fields are marked *